[ignoramous]

> The US is teetering on the edge of a financial abyss.

Do you say this because of the outstanding debt? Otherwise, just their top 10 publicly traded companies earn more than all but 2 countries. Just the US defense budget ($1T and estimated $1.5T next year), which exports US foreign policy globally, absolutely dwarfs every other country's.

[khriss]

Debt, rather the lack of any via ble means for the US to pay back even a fraction of its debt without having the world's reserve currency.

Yes, theoretically they can always print their way out, but that's just default through inflation and bond yields will correct immediately to account for it.

[pfdietz]

It's the outcome I expect. It's probably the outcome the US politicians expect, too.

[Frieren]

> just their top 10 publicly traded companies earn more than all but 2 countries

Are not European countries trying to reduce dependency on American tech giants? China was very successful in this regard. Russia is also independent but in the most incompetent way possible. The EU could do it quite well.

The USA is not a reliable partner. To send data to the USA from the EU is a fatal mistake that needs to be corrected. The risk was acceptable in the past, but not anymore.

The USA comes from a very privileged position thanks to many factors. The government is making sure that non of the conditions hold anymore.

[pepperoni_pizza]

I'm sure you've seen many empires come and go in your thousands of years as an immortal elf mage.

[vkou]

The issue isn't the debt. Debt can be paid off.

The issue is that there's a complete collapse in it's ability to pick good leadership, or at least leadership that can meet the bar of 'doesn't piss on the floor', and no path for course-correction from it. It's in the 'everyone plunder as much as you can carry' stage, and nobody cares.

(Which also means that whatever that debt will be buying will more likely than not, be incredibly stupid, and likely self-destructive.)

[piva00]

Debt can be paid off until it can't, US's budget expenditure on interests has tripled since 2020, it is larger than their expenditure on the military now.

The 10-year bond yield is not controlled by the Fed, if it keeps raising the interests payment will continue the crushing of the budget. The USA currently depends on debt, it doesn't collect enough taxes to cover expenses as it is, with interests raising on an even larger debt amount there's no way out except for raising taxes to plug the gap. Any American politician who raises taxes will be out of a job, it's one of the most sensitive topics for Americans so it will only be done when the problem is out of hand.

Of course, the USA can just print its way out of debt instead of raising taxes but at that point their bonds wouldn't be as attractive, inflation would also become a huge issue (probably the 2nd most sensitive economic topic for Americans).

As far as I know most empires had their pivotal moment when their debt crushed their power, it seems to be inevitable.

[vkou]

> Debt can be paid off until it can't,

> The USA currently depends on debt, it doesn't collect enough taxes to cover expenses as it is

That's where the lack of 'good governance' comes in. Good governance would, as of 2026, require raising taxes. The US has plenty of capacity to pay, it's just that the people running it prioritize keeping capital owners happy over the long-term welfare of the country.

You're right that actually raising taxes is political suicide. That's one of the reasons this dysfunction has no escape clause, but the past 10 years have piled on a lot of other reasons, too. It's one thing when a government is ignoring a financial timebomb, but is otherwise, trying to... Run the country like a country.

It's another when it's ignoring a financial timebomb, while also running the country in the same way that a drunk runs a hurdle race.

[s_dev]

All of these financial 'privileges' are based on the US having the world reserve currency and petro dollar. The US in the unique position of being able to 1. Print Money. 2. Externalise inflation. 3. Ensure a base load demand for it's currency based off a worlds need of oil.

These privileges were supported wholeheartedly by all the worlds 'middle' powers e.g. Canada, Australia, Japan, Germany, Spain, Sweden etc. Thus establishing a world order.

The US has seemingly turned on all these middle powers for no reason, decided the world order needed to change when it was already #1. The US will of course still be a superpower but it is going to lose it hegemony.

[akie]

THANK YOU!

So many people, including very intelligent and well-informed ones, do not understand this. The US gets truly outsized benefits from having the reserve currency.

[nolok]

And what is that worth, when they failed to properly protect their allies in a war they initiated against something that was obvious and expected ? The attack on Iran has been absolutely terrible for the US's image as an absolute military power

[mazurnification]

Debt is symptom not a underlying cause. As well big defense budget and very big valuations (1). This is according to Klain and Pettis diagnosis that I think is correct one or at least close to being correct (from the "Trade wars are class wars" book - do not worry this has nothing to do with socialism).

Basically they argue that US (and other trade deficit countries) and China (and other trade surplus countries) are creating mirror imbalances that would have to be rectified - either by policy actions or when driven up to conclusion by system breakage. Like Great Depression or Japan lost decade on the surplus side. And possibly inflationary crisis on deficit countries (but this is my interpretation - I do not think they claim that and I might have not understood something).

In that lenses latest political development in US does make more sense.

(1) trade deficit pushes assets price up - as dolar from trade surplus has to return to US somehow - to buy stocks for example. That would also explain why market looks so good even if "real economy" is not so hot - but as US trade deficit is big so is stock demand. Similarly trade deficit pushes unemployment up - to keep it in check federal policy has to intervene. Could be by Biden IRA or by Trump big defense spending. This in turn results in big budget deficits.